Manroland Web and Goss announced completing their merger transaction this week, continuing the long-term consolidation in the industry that had already seen the brands of Harris, Marinoni, Cottrell, Faber & Schleicher, Plamag, Baker Perkins, Sheridan, Hoe, Walter Scott, Miehle, Dexter and Hantscho merge into these remaining two competitors. I may have forgotten a few more names.
Having spent my entire time in the printing industry with these two companies (including the former Heidelberg web business that today constitutes a big part of Goss), and having been involved in some of the previous efforts to consolidate and adjust to changing markets, I felt a bit of a full circle completion when I read the long announced news. (As a side effect I will probably post even less frequently than in the last few years.)
No wonder print is dead: newspaper dresses are out of fashion....
A scan from the anniversary book
Goss - 100 years (1885 -1985)
After decades of fierce competition, plus bitterly fought legal battles over dumping and intellectual property, the shareholders have concluded that this consolidation is the right step forward. Long gone of course are memories of billion dollar revenues in a mature but cyclical market which is now seen as in steady decline. Goss owner AIP pegs Goss at $210 million revenue while MR owner Possehl reports sales of Euro 235 million for 2017. With the new equipment market probably around $250 - $300 million and a handful of competitors like KBA, Komori, Manugraph etc. still active, it is obvious that the aftermarket business generated by the combined company's large installed base of newspaper and commercial presses will be central for the future.
While the two companies are pretty close in terms of revenue, the publicly available headcount numbers differ quite a lot, with AIP providing approximately 600 employees for Goss vs 1248 employees reported by Possehl for Manroland. It should be noted that the Goss numbers most probably include Contiweb which will not be part of the transaction, while the MR numbers include some operations which have been outsourced at Goss. Friday's press release talks about more than a 1,000 employees combined, obviously leaving some room for further consolidation as the company will surely rationalize its remaining global footprint. With Augsburg and Durham being the remaining production sites it is not difficult to see the next consolidation scenario.
Congratulations to Bert Schoonderbeek and his team who have successfully managed the Contiweb business for many years, whether being part of Heidelberg Web or Goss, and hopefully now have an opportunity to position the stand-alone company for its next phase.
Over the years all press manufacturers offered every conceivable variation of cut-off, web width, inker configuration and folder capability, allowing printers to choose equipment that promised a marginal productivity advantage for any given business investment scenario. While most productivity improvements were evolutional, gapless printing resulted in large step function productivity gains and became the dominant technology in high-volume heatset, especially in the 2-around markets in the Americas. Those who can appreciate the complexity of printing and folding at speeds of over 50 km/h will understand the engineering effort necessary to provide the support for this type of equipment, even if it just means addressing obsolescence issues, let alone the development of new technologies. It is already becoming apparent that the current business volume does not support much new development, with the 96-page/64-page short grain gapless presses being the last major productivity innovation. And that was ten years ago. Newspapers have not seen anything new since 4x1 hit the market in its gapless and mini-gap variations.
Let's hope that the management will have a lucky hand providing competent technical support for the wide range of products still in the market as well as an adequate product portfolio for the remaining new equipment customers, while pursuing the unavoidable product rationalization process which will go beyond the obvious M-600 vs Rotoman model debates and will include control systems, folder and drive concepts.
Maybe the lack of innovation and potential limitation of product choice will not matter as printers continue their own consolidation process, with the German market also following the long-term trend in the US and Europe. Consolidation often results in internal redeployment of equipment rather than new equipment orders. And newspapers may just be happy to extend the life of their machines through rebuilds and reconfigurations. Not a great outlook for any equipment manufacturer, but probably a good reason to merge and focus on the aftermarket.
Good luck to the new company!
Yesterday, Jan 9, 2018, Kodak's market cap jumped from around $120 million to $289 million and as these notes are being penned its market cap is north of $500 million. What a difference an announcement makes...
On Tuesday Kodak announced an initiative for "a photocentric cryptocurrency to empower photographers and agencies to take greater control in image rights management". It is a partnership with WENN Digital, which in turn is a venture between WENN (a UK based Celebrity and Entertainment News Agency) and Ryde GmbH, Germany. Ryde was founded by Jan Denecke, a lawyer specialized in media and copyright law. Ryde (google "Reward Your iDEas") apparently has software that finds unlicensed material on the internet, politely informs the web site owner of the infringement and collects the settlement. This technology will probably be the policing element in the beautiful new world of digital rights licensing with Kodak Coins for payments. UPDATE: www.rewardyourideas.com now forwards to the WENN Digital page. Here is a last screenshot:
Interestingly, in November 2017, Ryde borrowed $100,000 from Appcoin Innovations Inc., a pink sheets company (recently renamed to symbol ICOX).
Appcon has two executives and no employees, with current assets of $195,000 and current liabilities of $260,000, not exactly a lender with deep pockets.
Appcoin actually lent the money to WENN Digital Inc, which in turn sent it to Ryde GmbH. Turns out, Appcoin is also a provider of coin offering services to WENN Digital and expects to get paid in coins.
But wait, there is more: according to Appcoin's filings it owns 7.5% of WENN Digital and Appcoin Chairman Chell is a director of two other companies with an additional 12.5% position in Wenn Digital.
WENN Digital, not so much Kodak will be the company at the heart of the new digital asset blockchain. As of now, WENN Digital's web site is still in maintenance mode:
While the details are still a little murky, it appears that the system will be built on the Ethereum blockchain, which has been designed to handle business transactions, digital asset transactions certainly being prime candidates. The Ethereum blockchain has its own crypto-currency Ether, which could certainly be used for payments, but "Kodak Coins" may resonate better with photographers and help the acceptance of the system. So it looks more like an opportunity for Kodak to monetize its remaining brand value, rather than a technology contribution. While WENN Digital is handling the business, Kodak will get an unspecified royalty from all transaction and will start its own "coin mining operation" in Rochester. The term "coin mining" is somewhat misleading. Crypto currencies require consensus based certification of each addition to the blockchain. The computers providing that service - and using lots of energy in the process - get rewarded with new coins. I am speculating, but somebody has to provide the service for a new coin until the big boys get interested. With Bitcoin mining using as much electricity as Denmark (some 32 TWh), becoming a player in coin mining would be a real change for Kodak.
All in all, it looks like a very clever idea, designed to be disruptive to photography agencies like Getty Images. Of course, one cannot help but wonder how a Berlin company with a $100,000 loan got be at the center of this Kodak moment.
While the terms of Kodak's royalty deal are unknown, the increase in value of over $200 million, following the announcement, seems to be a little optimistic. In any case, it set the clock back by about two years and some investors will surely use it to get out alive.
In the long run it might be more interesting to follow WENN Digital and its shareholders, including the pink sheets company ICOX.
On March 30th the Supreme Court overturned a previous patent win for Lexmark and ruled that once a patented item has been sold once, the patent is "exhausted" and can no longer be enforced.
The full opinion can be found here.
Printers, being used to buying consumables for their offset equipment independent of the equipment manufacturers, have always balked at the idea of being tied to one manufacturer for ink. With inkjet ink exceeding the cost of a good French or Californian bottle of wine, it is certainly understandable that companies are looking for the lowest cost supplier. However, the idea of loosing your warranty if you get caught using cheaper ink has been an effective deterrent and chip coded cartridges have not made it easy to live outside the rules.
Of course, we also know that for a process as complicated as printing (digital, offset or any other variant) to work well, control of the environment is key. How many complaints about print quality have been reduced to paper quality, ink tack or other consumable parameters and how often has an inferior third party spare part with the same geometry (special grease filled bearings come to mind) been found to be the cause of an equipment breakdown?
So, there are clearly two sides to the issue. But with this ruling, printers are now free to wander off the reservation of their HP or Kodak approved supplies and the days of a business concept based on "lifetime margin", giving away the equipment and generating the margin on the revenue stream of supplies, are probably over.
Digital printing equipment is now being treated just as other printing machinery has been treated forever. Chief Justice Roberts used the auto industry as an example where manufacturers cannot control what people can do with a product after the sale.
It will be interesting to see if somebody will challenge the closed "eco systems" like Apple's down the road.